Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Earnings Release Conference Call. [Operator Instructions] This conference call is being recorded today, October 16, 2012, and may not be reproduced in whole or in part without permission from the company. There will be a replay of this call available through October 30, 2012, beginning approximately 2 hours after we conclude today. The replay numbers are 1 (855) 859-2056 or (404) 537-3406 internationally. The conference ID for the replay is 33161955.

I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Mrs. Coronelli, please go ahead please.

Beth Coronelli

Thank you for joining us today to discuss our fourth quarter and year-end results. Participating on the call are Greg Capelli, Chief Executive Officer of Apollo Group and Chairman of Apollo Global; and Brian Swartz, Senior Vice President and Chief Financial Officer. Our President, Joe D'Amico, is also here and will be available during the Q&A portion of the call.

As we discuss our results today, unless noted otherwise, we'll be comparing the fourth quarter of fiscal 2012, which ended August 31, 2012, to the fourth quarter of fiscal 2011. I'd also like to remind you that this conference call may contain forward-looking statements with respect to future performance, financial condition, regulatory compliance and other matters regarding the business of Apollo Group and its subsidiaries that involve risks and uncertainties. Various factors could cause actual results of the company to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed under Risk Factors and elsewhere in the company's most recent 10-K and subsequent 10-Q reports filed with the SEC and available on our website at www.apollogrp.edu. The company disclaims any obligations to update any forward-looking statements during the call.

Additionally during the call, we may refer to non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Our press release, which contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures, is also available on our website. I do want to let you know that you can anticipate our 10-K will be filed early next week.

And with that, I will turn the call over to Greg.

Gregory W. Cappelli

All right. Thank you, Beth. Good afternoon, everyone. This has certainly been a challenging year for both Apollo Group and our industry as a whole for reasons you know well. But during this difficult year, we've been building a stronger Apollo, squarely positioned to innovate and possibly influence the future of higher education.

This afternoon, I'm going to discuss our strategy with updates on our initiatives to differentiate University of Phoenix, develop business processes that are more efficient and effective while delivering the best possible experience and service for our students and to diversify into new markets globally.

Just quickly, first, let me recap our financial results for the quarter. We reported revenues of $996.5 million for the fourth quarter. It's down about 11% year-over-year and $4.3 billion for the full year 2012, down 10%. Our earnings per share were $0.52 per share for the quarter, that excludes special items, and $3.56 for the full year. We ended the quarter with total enrollment of roughly 328,000 students. New Degreed Enrollment for the quarter was 52,800. That was down 14% compared to the fourth quarter of 2012 and up sequentially from the 51,500 new students enrolled in the third quarter. For the full year, New Degreed Enrollment was down just over 2%.

Now, onto our strategy. First and foremost, differentiating University of Phoenix. This is a more competitive industry today, which is not a surprise to us nor should it be to anyone paying attention to advances in education and technology over the past several years. We've been preparing for this for some time. We want to be the university of choice for working learners. We understand that our almost 40-year history, with 750,000 alumni, doesn't alone anoint us to this position. In fact, we know we must offer a value proposition to students that is effective, with high quality outcomes, is affordable as it pertains to our value proposition and that ensures students can turn their education into a relevant career quickly and effectively. We've never worked harder to understand the needs of our students today and of our rapidly growing base of corporate partners. They have an enormous need for our services, if we can serve them effectively. With 3.75 million jobs posted for hire in the U.S. alone and a reported 23 million people either unemployed or underemployed, the skills gap is large and it's widening in our country.

We're building the formula that can put America back to work. So let me highlight how we're doing this. First, we've been making significant advancements at University of Phoenix, enhancing the academic and educational experience to include a focused path for students, connecting education to careers. We have an obligation to align our academic programs and services to support students in achieving their career goals, which we will incorporate directly into their academic programs at the beginning, not the end of their time with University of Phoenix. We're connecting with employers and now have established relationships with almost 2,000 of the nation's leading companies, including a growing representation of the Fortune 500. We're helping these corporate partners educate their workforces, hire qualified graduates and collaborate on curriculum that addresses their needs. We've seen significant new enrollment growth from this channel over the past year, enrolling students we anticipate will be motivated to succeed with the support of their employers. In fact, student retention within this channel is significantly higher than our traditional B2C channel, which is exciting.

Related to this effort, last quarter we launched Phoenix Career Services. It's an interactive online portal already being used by 1/2 of all University of Phoenix students. Employers are now directly recruiting students for nearly 20,000 job opportunities from this portal alone, and we're tying these initiatives into our new advertising campaign as well.

You may have seen it. We just launched our new "Let's get to work" advertising campaign. It emphasizes the important steps the University of Phoenix is taking to address the workforce skills gap by connecting a quality higher education directly to career opportunities. We're using technology among other concepts to ensure that our graduates have the skills and competencies that employers are seeking for the jobs of today and tomorrow. This ties back into our Workforce Solutions team, which continues to create numerous relationships with corporations and the workforce development arms of leading industry associations.

Now, this week, we began showcasing some of these corporate and industry relationships in our radio and our television ads that feature, among others, Microsoft, Adobe, AT&T, Hitachi Data Systems, MGM Grand, Newell Rubbermaid, Avis Budget Group and the American Red Cross. There are more coming. While our new ad campaign and overall marketing efforts increase awareness and communicate our value proposition to students and employers, it's our reinvigorated programs and services that will help us to stand apart. Ensuring our students complete their programs with successful outcomes, it's our primary focus. Examples of actions we're taking include: one, helping students strengthen the skills needed to succeed at the university level as we incorporate our Carnegie Adaptive Learning product into our initial math courses as one tool to meet this objective; two, delivering a rigorous and relevant academic experience, of course, but now in a way that it's supported by our new learning platform, along with providing additional services to improve long-term outcomes; three, connecting programs and support services to the students' career objectives, which I've discussed; and four, offering students with limited college experience the opportunity to complete University Orientation, which we're actively working to take in a bolder direction with increased assessment capabilities, technology enhancements and potentially even gaming.

Ensuring that attaining a student's university education is accessible and affordable. Our announcement last week of a tuition freeze for new and currently enrolled students eliminates the worry and risk of tuition and fee increases all the way through graduations for students who maintain continuous enrollment. This is also supported with other tools and services we offer, such as our tuition calculator; that helps students understand the full cost of their entire degree program while mapping a personalized plan on how to pay for it, including the implications of borrowing against their future career of choice. We're committed to providing the leading student protections in the industry and supporting our students to help them retain and reach their long-term objectives.

Now, before I turn the call over to Brian, I want to take just a moment to provide an update on a key piece of our strategic roadmap: To become a more efficient organization. We've made significant progress already to reengineer our business and refine our delivery structure in support of our student-oriented mission, including the realignment of the University of Phoenix ground campus system. Our optimization strategy is focused on: one, developing more efficient and effective business processes that deliver the best possible experience and service for our students; two, controlling cost to keep education affordable and accessible; and three, reinvesting capital in innovation for new and better ways to reach and serve the working learners who can close the skills gap in America.

Throughout 2012, we've analyzed all aspects of our business, looking at every touch point with our students, studying how we can better serve them. We're simplifying operating policies, we're removing redundant processes, we're updating manual systems including automating processes to help improve student services. Overall, we're building a much more efficient organization, creating a university that clearly resonates with students and is committed to providing a best-in-class experience. We're positioning ourselves to be more nimble, more competitive and successful for all of our stakeholders in Apollo. We expect that these initiatives will deliver a minimum of $300 million in savings through 2014, which Brian's going to discuss more in a moment. But we're going to continue to look for opportunities to become a more efficient organization going forward.

As part of these efforts, we've completed a comprehensive study of our campus and learning center locations to understand where we're best supporting a thriving local population. This involved evaluating a campus structure that's been built over the past 40 years and, in some cases, for the needs of the students back in the '70s and '80s. Times have changed, and we're changing in order to take into account the needs of our students today, their preferences and lifestyles, their ability to gain access to low-cost technology, as well as the realities of our socioeconomic conditions in the U.S. today versus the past. We've identified certain locations that are simply not serving the same numbers of students as they did in the past. And we know that learning occurs best with high student satisfaction and retention in a vibrant community.

The social aspect plays a vital role in the ground campus setting. It's this vibrant, community-focused environment we're committed to providing for our students, taking into account how they learn in today's world. We've begun realigning our ground location network, which will impact about 13,000 students who we'll continue to support by providing workable alternatives as they complete their education. This change will also impact some of our employees who have worked hard to create a quality experience for our students in these locations. With this realignment and our broader actions, we'll be reducing our total headcount by about 800 employees this year. By phasing out a number of locations, 25 campuses and 90 smaller learning and student resource centers, the University will be focused on investing in state-of-the-art technologically integrated facilities, offering academic and career support and increased mobile connectivity. And while we're decreasing our ground location square footage by about 40%, we're only impacting 4% of our total student population. That speaks for itself.

With the tremendous work of our team, we're positioning ourselves to provide our students a differentiated experience, aligning their educational goals to support their career aspirations online and through our network of 112 locations, one of the largest physical footprints of any university across the nation.

Finally, let me update you on Apollo Global, which is one of our primary vehicles to diversify Apollo Group. We announced today the purchase of our partner's interest in Apollo Global. We've been fortunate to work closely with Carlyle for the past 5 years in our efforts to expand our business.

At Apollo Global, we continue to see improving performance broadly at BPP and are pleased with our progress in the professional education programs. As we announced last quarter, we have a new CEO leading our joint venture efforts in India, and we continue to move forward, working closely with HT Media.

In Mexico, we've rolled out a new working learner program, and it received a positive response exceeding our expectations. Global is on track to reduce its operating losses meaningfully over the next year while increasing its global reach in new and exciting areas of the world. And our expectation is that it will eventually generate a healthy return on investment for our stakeholders at Apollo Group.

So in closing, we're squarely focused on our long-term strategy at Apollo, which includes differentiating University of Phoenix, diversifying Apollo Group and becoming a more efficient organization overall. And despite the current challenging U.S. environment, we're making significant progress on all 3 fronts.

Now, I'll turn the call over to Brian Swartz.

Brian L. Swartz

Thank you, Greg, and good afternoon, everyone. I'd like to start by reviewing our fourth quarter financial results. Then I will discuss a number of regulatory matters and share with you our business and financial outlook. During the fourth quarter, revenue decreased 11% year-over-year. This decrease was primarily the result of a 14% decline in Degreed Enrollments at the University of Phoenix to roughly 328,000 students, which was partially offset by selective price increases and favorable student mix. For New Degreed Enrollments, we reported a year-over-year decline of 14% for the quarter, and we're down 2% for the year. We were up sequentially, enrolling 52,800 students in the fourth quarter compared to 51,500 in the third quarter.

Revenue per student was up 2% year-over-year, reflecting increases due to price and the student degree mix, partially offset by a decrease in average nights of attendance primarily at the associates level. For the fourth quarter, income from continuing operations was $53 million or $0.46 per share. Results for the fourth quarter of fiscal year 2012 included restructuring and other charges of $9 million associated with our optimization efforts. The charges consisted principally of $10 million of employee severance and other costs associated with workforce reductions and $5 million in consulting costs for services to identify and evaluate operating efficiencies. These charges were partially offset by a decrease in estimated lease costs associated with leases we previously exited. Excluding the restructuring and other charges, our operating margin was 10%. Income from continuing operations was approximately $59 million, and EPS was $0.52 per share.

In the fourth quarter, we completed the disposition of BPP subsidiary, Mander Portman Woodward, a U.K. secondary education institution for approximately $85 million. The sale reflects our strategy to focus on the post-secondary global education market. We recognized a gain on sale of approximately $27 million net of transaction costs and reported its operating results as a discontinued operation.

Next, looking at our fourth quarter operating expenses. Our instructional and student advisory and marketing costs were all up for the quarter, which I'll speak to in a minute, while we saw a decrease in admissions advisory principally related to current enrollment levels. G&A was essentially flat, taking into account the exclusion of a one-time investment in the fourth quarter of 2011. In fiscal year 2013, we anticipate substantially all of our expense line items will decrease as a result of our optimization efforts. In instructional and student advisory, we continue to invest in the fourth quarter to improve student outcomes and experience, including the development of our learning and student services platform. As a reminder, about 13% of our revenue is variable in nature and is included in our instructional and student advisory expenses.

As Greg discussed, we are building relationships with employers and staffing for this area is reflected in our marketing expense. We are also investing in our digital capabilities, including enhancements to phoenix.edu, as well in our social media efforts. While marketing expenses were up for the quarter, this was offset by lower advertising spend, primarily in the affiliate channel.

Share-based compensation was $90 million in the fourth quarter and $79 million for the year. For the full year 2013, we expect share-based compensation to be lower and in the range of $70 million to $75 million. Bad debt expense, as a percentage of revenue, was 3.9% in the fourth quarter and 3.5% for the full year. For fiscal year 2013, we expect our full year bad debt expense, as a percentage of revenue, to continue to trend lower as we continue to implement process improvements.

Finally, depreciation and amortization increased in the fourth quarter and for the year, primarily due to higher intangible amortization associated with the acquisition of Carnegie Learning and the depreciation associated with technology investments.

Our effective tax rate was 42.5% for the year. We anticipate our tax rate will be approximately 42% for fiscal year 2013, excluding any discrete or unusual items.

Turning briefly to the balance sheet and cash flows. We had unrestricted cash and cash equivalents of $1.3 billion. Our outstanding debt was $720 million versus $599 million at the end of last year. We've repaid the entire $615 million drawn on a revolving credit facility subsequent to year end. Excluding Apollo Global, our day sales outstanding for the quarter was 22 days compared to 23 days at the end of last year. For fiscal year 2012, our free cash flow decreased to $436 million compared to $735 million in the prior year. Our free cash flow was negatively impacted in the current year by the $145 million settlement of our securities class action lawsuit, as well as decreased operating income, partially offset by lower capital expenditures.

During the fourth quarter, we repurchased 2 million shares of stock for $64 million at an average price of about $32 per share. Year-to-date, we have repurchased about 19 million shares of stock for $800 million. For your reference, assuming no additional share repurchases and using a stock price consistent with today's closing price, our expected diluted share count is anticipated to be approximately 114 million shares during 2013.

Before I discuss our business outlook, I would like to cover 4 additional topics. First, to update you on key regulatory matters, 90/10, cohort default rates and the Department of Education program review. For fiscal year 2012, the 90/10 percentage for University of Phoenix declined by 200 basis points for the second consecutive year to 84%. This improvement is largely attributable to student mix changes. For University of Phoenix, the official 2010 2-year CDR was 17.9%, and the 2009 3-year CDR was 26.4%. The 2-year rate decreased approximately 100 basis points from 2009, and we expect this downward trend to continue for the fiscal year 2011 2-year cohort rate, given our repayment and other debt management initiatives. For the 3-year rate, our current estimates indicate we will remain below the 30% threshold for the 2010 cohort.

I wanted to inform everyone that the Department of Education program review that began in July was concluded, and we received an expedited final review determination letter from the Department and there were no findings.

Second, as Beth mentioned, we plan to file our Form 10-K early next week. I wanted you to know we have revised our segment presentation in our upcoming Form 10-K to reflect 3 reportable segments: The University of Phoenix; Apollo Global inclusive of BPP; and an All Other category, which incorporates our remaining operations, including corporate. This presentation reflects how we view our financial performance and allocate resources to our business units.

Third, as we reported today, we purchased the remaining 14.4% ownership interest in Apollo Global from Carlyle for approximately $43 million in cash plus a contingent payment based on BPP's operating results through fiscal year 2017.

Finally, before moving to our business and financial outlook, I want to provide additional details regarding our strategy to optimize our business processes and deliver structure, which Greg -- to optimize our processes and delivery structure, which Greg shared earlier. By fiscal year 2014, we anticipate our initiatives will favorably impact annual operating expenses by at least $300 million when compared to our 2012 cost base. We expect to realize more than 1/2 of these cumulative cost savings by the end of fiscal year 2013, with the remainder realized in 2014.

The University of Phoenix is realigning its ground locations, which will directly impact approximately 4% of the student body. This plan includes closing 115 locations consisting of 9 learning -- 90 learning and student resource centers and 25 campuses. After the realignment, University of Phoenix will preserve a national network of 112 locations with a presence in 36 states, the District of Columbia and Puerto Rico. Subject to regulatory approvals, we expect the realignment to be substantially complete in fiscal year 2013. We anticipate incurring approximately $175 million of restructuring and other charges principally for lease exit costs, with most of the costs incurred in fiscal year 2013.

We also announced today that we will be reducing our headcount by approximately 800 employees, excluding faculty, in fiscal year 2013. This is approximately 5% of our total headcount and takes into account workforce reductions and attrition during the year. We anticipate incurring approximately 100 -- I'm sorry, $25 million of restructuring and other charges in fiscal year 2013 related to workforce reductions. I'd like to point out that we've been very prudent in managing our total headcount. We have reduced our total headcount by approximately 20%, excluding faculty, since the beginning of fiscal year 2011.

Now I'd like to spend a minute and provide some commentary on our business outlook. We are focused on the initiatives that support our efforts to enroll new students, improve retention and optimize our cost structure. These are considered in our outlook, along with other items. In the first quarter of 2013, our best estimate at this time, in light of the campus realignment, is that we expect to enroll a similar number of students as we did in the fourth quarter. Given the robust new enrollment growth in the first quarter of 2012, if we enroll the same number of students sequentially, New Degreed Enrollments in the fourth -- in the first quarter of 2013 would be down on a year-over-year basis by approximately 17%. As I mentioned, we have just begun a major campus realignment, which could add variability in our New Degreed Enrollment outlook. Our goal is to return to year-over-year New Degreed Enrollment growth at some point in the second half of fiscal year 2013. Based on our current view, our financial outlook for fiscal year 2013 is net revenue of $3.65 billion to $3.8 billion and operating income of $525 million to $575 million. The operating income outlook excludes the impact of any special items and restructuring and other charges but does include the expected expense savings from our ongoing focus on optimization, including the University of Phoenix ground realignment plan.

Additionally, to provide some additional information regarding our financial outlook, we expect the majority of our 2013 optimization benefits to impact our fiscal 2013 second half cost base, with the goal of improving our year-over-year margins during that time frame. Due to our normal seasonality, much of the cost reduction will not impact the financial results in the second quarter. Also, as I mentioned earlier, in fiscal year 2013, we anticipate substantially all of our expense line items will decrease as a result of our optimization efforts.

And with that, let me turn the call over to the operator so we can take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Paul Ginocchio from Deutsche Bank Securities.

Paul Ginocchio - Deutsche Bank AG, Research Division

For the 17% decline in the quarter you just talked about, that's missing a day, right? So on a normalized basis, it's more like kind of 12% on a same start date?

Brian L. Swartz

No, Paul. Actually, Q1 2013 will be consistent. In fact, all the quarters in fiscal 2013 will be consistent with '12. So there won't be any material days adjustment year-over-year.

Paul Ginocchio - Deutsche Bank AG, Research Division

Great. And then just looking at the guidance for revenue and EBIT, even taking out the $150 million of cost saves, you are -- the remaining sort of cost saves looks to be a pretty significant amount of the revenue decline. So it just seems like your variable costs in fiscal '13 are a lot higher even, again, excluding the cost saves versus, say, fiscal '12 or fiscal '11. Can you just talk to that?

Brian L. Swartz

Yes, absolutely. So if you apply the 13% of revenue, you get numbers within the financial outlook that we provided north of $150 million in cost savings. And so those are either normal business operating cost savings. I also want to point out that the guidance on the cost savings were a minimum of $300 million and more than 1/2 of that in fiscal '13. So we're not being any more specific than that, but that gives you directionally the amount of cost savings we expect to realize.

Paul Ginocchio - Deutsche Bank AG, Research Division

Great. And I guess just one more quick question. Just a couple of quarters ago, I'd asked about seeing more see zero credit sort of bachelor students. Is that trend continuing? Are you seeing more students going to reg a program as a percentage of the new students coming in with low credits or zero credits?

Gregory W. Cappelli

Paul, that -- this is Greg. That varies from year to year and quarter to quarter. At times, we have in certain quarters. Is they're a trend overall over the past several years? I'm not sure we can draw that conclusion. But certainly, from time to time, and I'm not sure exactly what drives it, the economy or the competitive landscape, but yes, we -- from time to time, we have seen spikes in that, and other times, we've not, just like we've seen a shift more towards bachelors programs recently than we have associates.

Operator

Your next question comes from the line of James Samford from Citigroup.

James Samford - Citigroup Inc, Research Division

Just wanted to talk a little bit more about your pricing strategy, and it sounds like -- it looks like 90/10 is working out in your favor at this point, particularly as you add more corporate. Are you going to be able to potentially lower tuition at some point that -- to maybe compete a little bit more effectively against some of the traditional online -- schools coming online?

Gregory W. Cappelli

Well, let me just say something about -- thanks for the question about pricing. Here's the way we view it. No matter where you're priced, certainly there's -- there are students who want the lowest possible price point. They might want $50 or $100 a credit hour at a community college or very low price option. They don't care about the services and the grad teams and the capabilities online or depth of learning or whatnot. That's what they want. That's the value proposition for them. There are people at the other end of that spectrum that will pay $50,000 or $60,000 or $70,000 a year because they want to be part of an exclusive community that might let in 10% or 15% or 20% of all the applicants. And then there's the middle, where we've positioned ourselves. Wherever we're priced, we believe that the value has to be there for the pricing. So in the case of the University of Phoenix, we've elected to add capabilities we think are going to truly help people from their first touch point of providing them with assessments, helping them understand where they are in the U.S. in terms of their capabilities, what they need to do to get the career that they're saying they want to get, help them drive a personalized roadmap for that and then provide them all the tools that are necessary to have a highly successful outcome. And there's investment to do that. So there's a value proposition there that a portion of students want. We think that's going to be the biggest portion and that's where the University of Phoenix is pointed right now. But it's fair to say that we're always monitoring, in every market we operate in, our competitive position, which includes price as well. And we've made adjustments from time to time on a market-by-market basis and we'll continue to do that as necessary, going forward.

James Samford - Citigroup Inc, Research Division

That's great. Just a quick follow-up on uses of capital. It looks like, obviously, $800 million bought back this year. Once the business stabilizes, any thoughts again on potentially dividends versus buybacks at this point?

Gregory W. Cappelli

Yes, that's always part of our conversation in terms of the uses of capital. The conversations are, what are the things that can move the enterprise value of the organization first, right? Are there opportunities to expand into places like India? We've talked to that -- about that or other areas in the world as we expand Apollo Global. The answer to that is yes and we'll continue to be prudent with that capital, but invest in areas where we see high ROI long-term propositions. Two, obviously investments into the University of Phoenix which we're making and have made and continue to make that we talked about in this call. Share repurchases, I think we've repurchased 30-some percent of the float over the past 2 years, 3 years, a couple of billion dollars' worth of stock. That continues to be part of the equation in discussions and certainly, dividends will be part of those discussions as well. So I'm not ruling any of that out. And again, it's a part of a good, healthy capital allocation discussion with our board that we have quarterly.

Just given your statements that you expect the reduction of square footage of 40% to only impact 4% of the students, I was wondering if you'd be willing to provide any sort of current rough mix between online versus ground versus hybrid?

Brian L. Swartz

Jeff, I'm going to ask Joe to comment on that as well. But I don't have that mix data right in front of me. I will tell you that most of the students impacted in those locations are going to be on the ground because the online students, although they're initiated out of the campuses, in some cases, they still have all the access to the online LMS and services that we provide at University of Phoenix.

Joseph L. D'Amico

The trend to online continues. We really haven't given out that information in the past and I think we're still not giving that out.

Okay. And then can you talk about the evolution of kind of the upfront assessment process, both in terms of how it plays into the orientation to that, but also in terms of how it plays into your end to end, I guess, process of creating but pathways to connect the students to careers?

Gregory W. Cappelli

Yes, it's a great question and it's extremely important for us. It's something that we've been learning, piloting and putting in selectively and carefully throughout the University of Phoenix and some of our other institutions as well. One of the things that you realize is that you have to have information and an understanding of the capabilities of the student. And that doesn't just mean throw a test in front of somebody, because people learn differently. It's one of the things we know from adaptive learning. Their capabilities, they might show you them in a number of different ways. We need to gather more information. I look at it as here's a gift. We're not going to throw you right into a math class your first day at University of Phoenix. You need to understand where you are and build a path so you can have the utmost success at University of Phoenix. So it's gathering that information. Now we're doing that in a number of different ways. That might be from your very first touch point when you come to phoenix.edu. There opportunities to take assessments. There are increasing assessments being built into future versions that are not too far away of student orientation. And we're working on other initiatives as well, but it's having as much information as you can so you can help a student more from a customized perspective.

Joseph L. D'Amico

Yes, I would just add that we're not only looking at assessments that involve curriculum or sort of the aptitude, but also the person's desires and their ability to get through a difficult course like ours is or difficult programs like ours. So we're looking at all aspects of assessment and sharing that information with the student so the student better understands what they need to do to succeed.

Okay, and then just 1 clarifying question. When you say that you expect over 1/2 of the cumulative savings by the end 2013, are you saying we should expect at least $150 million of savings in 2013? Are you saying on a run-rate basis by Q4 to expect that level?

Joseph L. D'Amico

It's the former. So we expect to benefit the 2013 total operating expenses by at least $150 million related to these, the optimization initiatives.

Operator

Your next question comes from the line of Jerry Herman from Stifel Nicolaus.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

First question's just about the guidance for this year and, in particular, the sort of midpoint revenue decline of 12.5 percent-ish. Should we just think of RPS in the most simple form being flat for the year, reflecting tuition freeze or should we also think about the impact on retention and timing in terms of what that -- how that moves RPS?

Brian L. Swartz

Yes, Jerry, it's a good question. Let me try to provide a little bit of context for that. First of all, on RPS basis, the tuition freeze did go in place. It's reflected in the outlook discussion. And on at least from a discount perspective, our discounts were up about 100 basis points, a little less than that in fiscal '12 compared to fiscal '11. We would expect that trend to kind of continue basically into fiscal '13. So it's just a continuation of that trend and some modest improvement on an RPS basis. And then the tuition, keep in mind -- mindful of the tuition increase was last July and we're freezing tuition now for students that are in the program at the current rate. So as long as they stay continuously enrolled this year, there won't be a price increase for them, at least next July. With respect to retention, let me try -- [ph] or persistence, which is I know the way you and many others look at it. When we look at retention or the persistence numbers in Q4, we expect kind of sequential improvements in that number throughout fiscal '13, with kind of seasonally higher graduations in Q3 and Q4, moderating that a little bit. So that gives you a little bit of color in terms of where we expect the persistence rate to go.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. And then just a strategic question, I guess, for Greg and Joe here with regard to the campus footprint. I mean, you guys have talked a lot about differentiation and I guess it would seem to us that, that is a differentiator, your campus footprint. I wonder if you could just kind of talk us through that. I realize the numbers there are pretty small, but you also mentioned that some of the online students, in fact, attach themselves to the University through that on-ground footprint. Help us with that, please.

Gregory W. Cappelli

Yes, sure. I mean you can see the number of students that we're talking about. It's relatively small. Look, let me put it here a little differently. We've built an incredible system where the roadmap and strategy was built in the '70s, right, in the '80s. And a lot has changed. As I've said upfront, a lot has changed; students' needs, demographically. We know what they want. We're asking them. We are going to have a massive coast-to-coast footprint with the remaining campuses and learning centers. And by the way, it's not to say that we won't selectively open up in new markets in different locations going forward, which we're doing around the world by the way. So we've talked just about these locations, but here's what we know. We know that retention is significantly higher, and the experience and the outcomes are better when you have vibrant communities of students. These locations, the University of Phoenix leadership team, did a lot of work. And these are locations they think that we're not going to have as much success in. That doesn't mean that we might not add in others. It means that we're going to be obviously -- going to be taking the current footprint that we're talking about and enhancing these locations with technology, connectivity, all kinds of other interesting ways of challenging students within campuses to work together, think together, compete against each other, potentially use gaming with each other to have a better outcome.

Joseph L. D'Amico

Jerry, this is Joe. One other point is that I don't remember the exact number, but it's a fairly large number, maybe approaching 50% of the students are within 25 miles of another campus. So it's not like they will be way far away from campuses. So a good portion of them are reasonably close.

Gregory W. Cappelli

Yes, and remember that 90% of these are learning centers, which I know you've been to some of them, Jerry, and other -- it's very, very different than a campus, a main campus.

Operator

Your next question comes from the line of Kelly Flynn from Crédit Suisse.

Kelly A. Flynn - Crédit Suisse AG, Research Division

I just want to go back to the start. Can you just talk a bit more qualitatively about what's going on there, kind of why the decline widened? And I know you observed a tougher comp in the first quarter, that explains it, but what are the factors, pros and cons, impacting starts and kind of what changes as we move into the back half of this year that makes you optimistic you can grow?

Gregory W. Cappelli

Kelly, let me take the first part of that and I'll ask Brian to comment as well. I mean certainly, this quarter, next quarter are our 2 toughest comps, without question. So I think that's why you see us sequentially, the numbers not falling off a lot, but year-over-year, we grew a bit unexpectedly last year on the roadmap of our long-term plan. And that's affecting this year. As it relates to why the comment was made that our expectation is to grow at some point in the second half of the year, before the year end, I should say, it's really the things that we talked about that we're getting to market. It's those relationships with employers where we're seeing rapid growth in that area. We know that's working. That's continuing to grow as a percentage. I wish it were larger right now, but we're building that. It's differentiators in the market where we just literally rolled out adaptive learning to certain math programs. There's more coming. We're starting to roll out the new platform which will make a difference, we hope, and really be an enjoyable experience for students. The alumni, over 700,000 where we're beginning to tap more of them to be mentors, to differentiate in that area. It's the career tools. It's the relationships of building the education to careers and then the employer relationships that we have. It's those things that -- look, we're trying to differentiate and build a different type of experience for a student. And also get it into the market so that our own people can eloquently explain to potential students the difference between the University of Phoenix and some other universities in the country. I think that's going to be essential and key and that's why -- I mean there's more to it than that, but there's a lot that goes into the second half and that's a big part of it.

Kelly A. Flynn - Crédit Suisse AG, Research Division

Okay, great. And then just a couple of other quick ones. On the bachelor starts, I know we talked in the past about, I guess, the effect of historical associates' declines now flowing into the bachelors'. With that said, I mean should we expect the bachelors' declines may widen while associates' may improve some more? Is that how to think about it?

Brian L. Swartz

Yes, so you're referring to those associates who we matriculate into bachelors. And just to, I guess, reaffirm it, more than 50% of our associates that do graduate go onto our bachelor's programs and they do retain, obviously, at higher levels. So those metrics have stayed up. In terms of the impact, going forward, given the lower associate gross in the last couple of years, we actually expect that to be relatively flat in '13. I think initially, we expected that to more unfavorably impact the bachelors' growth, Kelly. But the time the matriculation is just stretched out a little bit, so we have less associates going into bachelors in '12. They've kind of been pushed into '13. And at least at this point, we expect it to be flat from '12 compared to '13 on those matriculations.

Kelly A. Flynn - Crédit Suisse AG, Research Division

Okay, great. And then lastly, just on the orientation, can you revisit some of the comments you guys made last quarter about maybe putting in place some options to test out for students that are well prepared and kind of where are you with that? Has that started to help at all yet or is that something we may see later this year?

Gregory W. Cappelli

No, it's a small pilot right now for us, Kelly. So no, there's absolutely no reflection of that in the numbers. I think there's a wonderful team at the University of Phoenix made up of academics and technologists and developers that are gathering more and more information from students, really understanding their needs. Orientation is designed to be a great help to students, to help them understand where they are versus others in their class or the country, where they measure up, what they're going to need to do basically to have success. It also keeps a lot of people out of debt, that we don't want taking out a debt until they understand that. And so the opt-out feature is something that they're studying. I'm not sure that that's ultimately going to be the direction that we go with it. There's a lot of other really neat advancements in orientation that are coming. But ultimately, the goal is to make sure that we're not scaring people away from the University. That we're actually helping give them additional tools so that they have confidence, they can have success if they go into the program.

Joseph L. D'Amico

Given -- I'll just add that in a lot of the discussions with students who we might encourage to skip orientation, they actually want to take it. And they get value out of it. So we're also finding that as one of the results.

Gregory W. Cappelli

We have students that literally aren't required to go through it if they have over 24 credit hours, that have come to us and said, "I want to take it."

Operator

Your next question comes from the line of Sara Gubins from Banc of America.

Sara Gubins - BofA Merrill Lynch, Research Division

I wanted to follow up on the earlier discussion about tuition levels and pricing. Are you able to survey prospective students who say that they're interested but don't come, to understand where they go and just how important cost was in their decision-making process?

Gregory W. Cappelli

We do, do surveys of students and we do, do research on a national basis and a local basis to understand what's going on in the markets. As I've said, in some communities, for some students, price is a very big issue and it's what they felt. It's what drives the most value to them. And in other cases, it's certainly not. It's the ultimate success that a student thinks that they can have. So they need more, they want more from their university going forward.

Sara Gubins - BofA Merrill Lynch, Research Division

Okay. Also, to follow up on Kelly's question about the associate matriculation into bachelor's programs, could give us a rough estimate of how many bachelor starts in fiscal '12 came from the -- from associate graduates?

Brian L. Swartz

Yes, Sara, it's Brian. We haven't given out that number before. I mean, I'll tell you, it is a meaningful number of the bachelors' new enrollments in any given period or any given year and then they matriculate at very high rates coming out of the associate. So you could do some -- I mean just to help you think through how you might get to those numbers, you can look at associate trends and some of the graduation rates that we certainly publish in our annual academic report and just do some modeling over a 2- to 3-year period and then -- and come into -- back into some numbers.

Kelly A. Flynn - Crédit Suisse AG, Research Division

Okay. And then just last, within your expectation for fiscal '13, when does the loss of the 13,000 students impacted by the campus closures begin to impact starts in enrollment? And could you give us a sense of how many starts those locations typically contributed?

Brian L. Swartz

Yes, so we'll -- so of the 4% of the student body or so that it impacts, we actually expect -- we don't expect all of those students to leave the student body. In fact, we expect many of them to either move to online or, as Joe mentioned, to move to campuses nearby, usually within 25 miles or so. So we do expect to retain many of those students. Exactly how many, we don't -- we have points of view on that. So that's a -- we think that's important to provide service to those students so they can finish their education. From the standpoint of the impact on the total enrollments, it's roughly 4% of the student body. In new enrollments, as I mentioned in my commentary, even in Q1, there's probably -- there's obviously a lot of moving parts in the next, call it, 60 to 90 days, given the campus realignment that will have some impact on new enrollment levels. But we don't expect it to materially impact the numbers. We've baked it into the commentary I had on the outlook as best we could.

Joseph L. D'Amico

Brian, I just want to reinforce the point of the whole phase out of the campuses, we are totally focused on ensuring that those students achieve their educational goals. And we're doing a whole lot of things to ensure that, including some monetary considerations, whatever accommodations we can do, including if we need to teach out while we're -- the entire period for those who want that. So we're really focused on that experience to make it a good one for all. And I would also add that phasing out campuses is not something new to the university. That happens each and every year and there's probably a good 10 or 20 campuses that we phase out each year and add each year. So our teams are very experienced with this and we have a lot of great people who are truly focused on making sure these students are treated right and get the education they came here for.

Operator

Your next question comes from the line of Suzy Stein from Morgan Stanley.

Suzanne E. Stein - Morgan Stanley, Research Division

Just as we think about the potential for Apollo Global over the long term, is there any change in strategy now that you'll own 100%? And I guess, what's the update just in terms of where you're looking to expand? And I think you mentioned that you expect this to be meaningful to your profits over the long term, but what does that mean in terms of time frame?

Gregory W. Cappelli

Yes, there's a projected 250 million postsecondary students in the world by the year 2020. So it is a large and growing market and there are many of the same skills gap issues in a lot of the countries that we visited and prepared to help over the past several years. So we're more prepared than we've ever been before to serve those markets. And in fact, where we have really good examples, it's not on the biggest scale yet, of things that we've done successfully at University of Phoenix, where we've taken those and put them into other markets where they're having really good success. I think that the opportunity for us, you're right, there are a number of -- we've got a sophisticated team that looks at country-by-country. They look at the potential needs in that country. They look to see what the financial conditions are of the country. You look at countries like Brazil which now have a program that's not exactly Title IV, but it allows students a much greater flexibility to borrow money to get into their programs of study, which is dramatically increasing the rate of growth in that country and college. But we're looking at opportunities in Asia, different parts of Asia, obviously, India. I mentioned we now have our CEO in place, a great partner there. And in other parts of the world as well, which, for competitive reasons, I won't go through country-by-country, I would expect us to be in a greater number of locations at the end of this year than we are now. But again, we're going to take the same approach. It has to be the right situation. We have the same sophisticated process that we look at in terms of the potential ROI to the company. And I see some exciting opportunities ahead. As far as your question about Carlyle, they have been phenomenal partners and they're still going to be invested in BPP with an earnout going forward, which we're happy about. We're prepared to help each other, wherever we're operating in the world and have a close relationship with them. As far as moving faster, I think there were a number of things that dictated the speed at which we went to this point. And obviously, with the help of BPP improving every month and people getting their feet onto the ground were the leaders of Global led by Tim Daniels, we're getting more comfortable at getting bigger on a bigger scale internationally.

Suzanne E. Stein - Morgan Stanley, Research Division

So should we expect acquisitions in this area going forward?

Gregory W. Cappelli

Well, Suzy, it could be an acquisition, it could be a start up like there is in India. It could be a JV, it could be a number of different things, but we're not going to look exactly like we look right now, my guess, for sure, by the end of this fiscal year.

Suzanne E. Stein - Morgan Stanley, Research Division

Okay. And then just on the resource centers. Are there any less or was 90 the kind of the whole of that?

Joseph L. D'Amico

Oh no, there are resource centers left.

Gregory W. Cappelli

All over the country.

Suzanne E. Stein - Morgan Stanley, Research Division

Okay. And I'm just curious. I know those were put in originally as a retention tool. There's no concern that closing them will negatively impact retention?

Gregory W. Cappelli

I'm sorry, say that one more time.

Kelly A. Flynn - Crédit Suisse AG, Research Division

The resource centers, is there any concern that closing those will impact your retention levels?

Joseph L. D'Amico

I don't think so. I mean there may be some fallout from that, but I think most of the online folks have places to go for their IT and computer needs. And these are in small markets, so I don't think we're going to find a big impact from it.

Gregory W. Cappelli

Yes. And we're doing a lot of other things in the retention. As I mentioned, one of the things that -- where we're seeing really good results is in the Workforce Solutions group, where that retention is significantly higher than for the rest of organization. So we're learning from that. And then also, when you start from the very beginning to help people connect their education to their careers, our assessment is that's going to have an impact as well. So outside of it, those resource centers and the other things that we're doing to try to positively impact retention.

Operator

Your next question comes from the line of Jeffrey Silber from BMO Capital Markets.

Jeffrey M. Silber - BMO Capital Markets U.S.

Just a quick question on persistence. I think you had mentioned that persistence was higher for your corporate partners than it is for the B2C. Can you give us a little bit more color on that?

Gregory W. Cappelli

I don't know that I'm going to give a lot more color on that right now, Jeff. What I would say is that think about what goes into that. When you have developed a partnership with a corporation, they have a much greater understanding of your university and they convey that onto -- we're allowed to work with their employees, so that they're coming in, understanding what it's going to take. In many cases, the corporation is paying for a good part of the education. There's a number of things that make the difference. We're assessing that now.

Joseph L. D'Amico

Yes, and the corporation has a vested interest in seeing the student persist as well. And when you add that factor, oftentimes, the supervisor of the individual and the program was sponsored by that supervisor. So they're involved with the individual. Some of our problems or -- in the classroom involve things at the company itself. So there's connections that we make that way as well.

Gregory W. Cappelli

One of the other areas that we didn't mention that we're seeing really good gains and retention is we've rebuilt a significant number of relationships with community colleges. Many times, those students will be some of your best retaining students because they've figured out how to go to college and they've graduated from the community college. We've been working hard to rebuild those relationships from a period of Axia to now, where we want to be their partners and we'd like to educate their students.

Jeffrey M. Silber - BMO Capital Markets U.S.

And can you just remind us in terms of percentages, or rough percentages of the starts that you get from the different channels, corporate partners, community colleges and maybe from B2C?

Gregory W. Cappelli

We haven't given that out yet, Jeff. We might in the future but we're not right now.

Jeffrey M. Silber - BMO Capital Markets U.S.

All right. And just let me follow up with a couple of numbers questions I hope you will give out. Just in terms of guidance or just to help us in modeling for fiscal year 2013, what should we be putting in for capital spending, for depreciation and amortization and for interest expense?

Brian L. Swartz

So for capital expenditures, we don't -- you want all of this?

Jeffrey M. Silber - BMO Capital Markets U.S.

Right here. I'll go through it again if you need to.

Brian L. Swartz

Bring your laptop over, Jeff. You asked about CapEx, interest expense and D&A, okay. So on a CapEx basis, we don't expect any major changes. I think we finished 2012 just under 3% of revenue. It could trend up perhaps a little bit higher to 4%. We've been doing some operating leases, as you'll notice when we file our 10-K and have noticed in our 10-Qs, so some of those don't show up on the CapEx line in the cash flow statement. But it's roughly in line, call it 3% to 4% of CapEx. With respect to depreciation and amortization, we actually expect all the line items to come down. That's 1 line item that perhaps will down a little bit less but we do hope that it will come down. Obviously, it's more fixed in nature. We do have the runoff of some amortization expense related to Carnegie and some other businesses. And then finally, on interest expense, what we have in Q4 should be relatively consistent for each of the quarters in 2013. You might see a slight increase in that over time and so again, as we do more capital leases, that we obviously incur some interest expense associated with those.

Operator

Your next question comes from the line of Peter Appert from Piper Jaffray.

Peter P. Appert - Piper Jaffray Companies, Research Division

So, Brian, just a clarification on something you said earlier. Did you say that your expectation is that revenue per student in 2013 is going to be up a fraction?

Brian L. Swartz

Well, exactly where it comes out will depend here. We don't expect -- I mean obviously, we had the tuition increase in July of this past year, which will impact those students. We've frozen at those levels. So depending on what happens with mix and, obviously, retention will impact it. But given that last summer's increase in tuition was less than the prior summer's increase, we'd expect the revenue per student to come down in fiscal '13 on a growth basis relative to the increases we experienced in fiscal '12.

Joseph L. D'Amico

That's one of the areas, Peter, when you ask the students and you listen to them. One of the challenges for them is to worry about, okay, I know we're starting. I'd like to not have to worry as much about where my tuition's going to go on a year-over-year basis if I stay in school.

Peter P. Appert - Piper Jaffray Companies, Research Division

And then, Greg, you addressed this a bit, I think, in your prepared comments, but just in terms of the competitive dynamic and specifically the impact of the not-for-profits setting more aggressive in your traditional market, how do you see that -- how do you think that plays out over the course of next year?

Gregory W. Cappelli

I think they are. I mean, look I -- and we've -- I don't think you've ever heard us on a call ignore the not-for-profits. I mean I think that more of them are online. So when you look at our historical model, it's been about convenience and it's been about serving people that don't have as much time, the working learner. And the not-for-profits range in a number of different areas where some have decided to open up their brand more, to put programs online, to lower the barriers to get in, in some cases, and others not. There's just more optionality for what we used to do. That's why we're looking forward and we're saying we know that there's ways for us to differentiate ourselves where students can have an even better experience. We're listening to what they want. They want us to help them tie their education to a career. They want certain tools to help them have success in school. They want to use more technology. They have much greater access to technology, specifically in areas of mobile. They want connectivity to thousands, tens of thousands, hundreds of thousands of alumni around the country. So look, your point is a good one. The -- we're not planning on the competition getting any easier. Some will use price as a lever because they don't want to differentiate. Others will try to differentiate and maybe have different price points. You have to pick a segment for your university that you want to operate in, and then you've got to deliver on that value proposition no matter where you're priced, and that's what we're doing.

Peter P. Appert - Piper Jaffray Companies, Research Division

Got it. And then one last unrelated thing. Can you give us any color on what you're seeing currently in terms of inquiry volume and change in that and conversion metrics?

Gregory W. Cappelli

So you want to comment on that, Joe?

Joseph L. D'Amico

Yes. The -- we're finding the inquiry volume is down, but part of that is what we have driven by moving a bit away from the affiliate network, as we've discussed on several calls now. And we still, by the way, treasure or find there's value in the affiliate network, so we're not abandoning it. But we certainly have moved away from it, and we have a lot of quality players in that market that we work with. The other side is that conversion rates have gone up, and we continue to focus on that and continue to try to offset the reduced lead flow with higher conversions.

Gregory W. Cappelli

Yes, I would say that a good portion of the decline is self-induced. And that doesn't mean it'll -- will continue to do that, but it's really important for us. We're trying to drive to a certain input into the university so we get the outcome that we're desiring. I don't know if you want to add...

Joseph L. D'Amico

And also, I would just add that it's important to understand the dynamic here of Workforce Solutions and our relationship with our corporate employers and corporate partners. The idea is obviously for that to continue to grow, as well as working on our -- the student experience. And with those students who have a great experience here, we're also getting referrals from them. So the key is to create a mix and we haven't reached the optimum level yet of that mix, but when we do, I think what we'll be positioned for is good, stable growth.

Brian L. Swartz

Yes, Peter, it's Brian. Let me just add a little more color into that as well too. One thing to keep in mind, our marketing dollars, total marketing dollars, as you see them this quarter, were up I think about 6% year-over-year in the quarter. Our ad spend was actually down year-over-year, and that's primarily in the affiliate channel. When we think about what we've done in the marketing area, what we -- and it's what we've talked about the last 4 quarters, nothing has changed. We're intentionally reducing lead flows in many, many channels like the affiliate, and we have seen increases in conversion rates. We expect that to continue as we move into fiscal '13, and we're making investments in what I refer to as marketing operations. Much of that is internal cost. It's things like investing in a chief digital officer, increasing the staffing capabilities of our corporate partner channel, increases in our social media capabilities, which are terrific. In fact, I think we're #1 on Twitter and #3 on Facebook in terms of education. So those are the kind of things we're doing to create more awareness and investing more money in the channels that send us higher -- more prepared students that retain at a higher rate. That's our strategy around marketing, and that's what we're going to continue to do into '13.

Gregory W. Cappelli

More than you could ever want in marketing, Peter.

Operator

Your next question comes from the line of Peter Wahlstrom from Morningstar Investment Research.

Peter Wahlstrom - Morningstar Inc., Research Division

Coming back to the tuition question or topic in where a student finds value, as you take a look at your current pricing model, you offer a comprehensive suite which basically offers all services to all students. Do you see a long-term vision where the students can pay kind of an a la carte for futures and options, where they can pick out what they want and what they need and, ultimately, have more control over their expenses?

Gregory W. Cappelli

Let me just say this about that area. We've been talking about the University of Phoenix and how we're positioning the University of Phoenix and wherever they're priced, driving value for the student. What we haven't talked about is that we have a number of other vehicles at the Apollo Group, where we are piloting and looking at different cost models because there are segments of the population we cannot serve with the value proposition at the University of Phoenix. There are other ways to serve those populations. There's also ideas and concepts and pilots that we're looking at that are completely different than the way education is being delivered today. We're convinced that technology is going to continue to cause this industry to evolve, and we're going to try to lead the way in those areas. So to answer your question, yes, I do think that you're going to see opportunities at the Apollo Group to offer different solutions for potential students, whether they want a degree or not around the country and the world.

Peter Wahlstrom - Morningstar Inc., Research Division

Okay. So if I were to read between the lines, the opportunity, such as like a massive open online course partnering with a Udacity or an edX and potentially having transfer credit would also be on the table as well?

Gregory W. Cappelli

Without getting into the specifics, everything's on the table in terms of trying to best serve -- trying to best close the skills gap in this country, yes.

Peter Wahlstrom - Morningstar Inc., Research Division

And internationally?

Gregory W. Cappelli

And internationally.

Operator

Your next question comes from the line of Corey Greendale from First Analysis.

Just real quickly. Greg, could you just comment on, I guess, qualitatively visibility in the business? And would you characterize your confidence level in the guidance this year as kind of higher, lower or the same as -- at the same time last year?

Gregory W. Cappelli

Yes, I'm not going to try to quantify my -- how I'm feeling about the guidance. I'm not comfortable doing that right now. What I would say is here's what -- there's no promises, right, with the guidance. What we're trying to do is lay out -- guys, here's the industry. It's changing. Here's how we're positioning ourselves. Here's our strategy, right. Differentiate Phoenix meaningfully. Definitely, don't put all the pressure on them going forward. So we're going to get better in Global, increase the size of Global. And we're going to continue to pursue opportunities with AES for the rest of the United States as well and there're opportunities outside the U.S. But I think it was Kelly's question or somebody that asked about well, why do you needing grow again? And it was really those initiatives that we put in place. There is a plan, there is a strategy. Does that mean it's going to happen automatically? No, it doesn't. But we're working really hard to listen to our students, to listen to our corporate partners, which are going to be a bigger percentage of the total organization next year than they are this year, and we're trying to do a better job of getting that message into the market. It's one thing to just say, "Hey, we're building all these differentiations." It's another to say, "We've executed. They're in the marketplace. Our people are trained on them so they can deliver that message." That is what wasn't happening before. Speed to ball, that's what we're focused on now. And when we come up with our plan and we make the comment that we do expect to return to start growth, at some point in the second half of fiscal 2013, that's what it's based on. Does that help?

It does help, and to be a slightly less expansive question. Just I imagine if there were a substantive update on HLC's process, you would have given it to us. But is there any update on the timing of that, and does -- do all of these changes you're making operationally in terms of the geographic footprint impact HLC's timing at all?

Gregory W. Cappelli

Good question. There is no update on that other than to tell you that their visits are complete and that we're awaiting a direct report from them. We had very good conversations with HLC during those visits with the University of Phoenix team, and we'll await their preliminary report. And as soon as we get it, we'll address it.

Joseph L. D'Amico

And HLC is aware of the plans that we disclosed today.

Operator

Your next question comes from the line of Gary Bisbee from Barclays.

Gary E. Bisbee - Barclays Capital, Research Division

Just one question due to the late hour, but it sounds like you continue to do an awful lot to try to differentiate University of Phoenix. But it's not clear to me how you'll get the message out there. Obviously, your prospective students aren't listening into this conference call. And I've seen 1 or 2 of the new ads, and the focus on work I think is helpful, but I'm not sure it really -- from what I've seen to date at least does that, gets out there how much different you're doing. What's the plan of attack? How do you get that message out there?

Gregory W. Cappelli

Gary, you're going to see some new creative coming, in fact, starting today. Not only in the radio but on television as well, and also digitally, where we know there's far greater eyeballs. I would just say that think about the biggest hurdle, I think, that we've had to get to overcome over the past couple of years is a reputation that we took a hit on, given everything that you know happened over the past 2 to 3 years. We've been working so hard to improve that. One of the ways you can do that is to go to people who trust you, to higher-year graduates and say, "Will you stand up for us? Will you go to market for us? We're serving you well. We're trying to do the things we need to power your company from a human capital standpoint." And when they say, "Yes," it's a very powerful value proposition to students. So you're going to see more of that. They want it as well, but that's some of what you're going to see coming. And it's also -- I tried to say this before, and I think maybe you're getting at this. When your students call to talk to you about your value proposition, why you're different than somebody else, you need to be really clear and articulate on what that is. And we're starting to work very hard now that these differentiations are coming in, in the marketplace to make sure that we have people that can do that. And that training is happening now.

Operator

Your next question comes from the line of Brandon Dobell from William Blair.

Greg, maybe as you thought about this kind of restructuring optimization process, was there a particular moment in time where the management team sat around and said, "All right, this is something we have to do" or was this in the making over the past year? I guess I'm trying to figure out if there was all of a sudden you woke up and said, "You know what? What we're doing is not working, so we got to take a different viewpoint of this." Or over the past year or so, given all the different strategies you guys have put in place to drive retention and enrollments, that this was kind of the last thing you wanted to do, but the enrollment trends were kind of dictating what you guys had to do at this point?

Gregory W. Cappelli

I'm going to ask Joe to comment as well, Brandon. We certainly didn't just wake up and decide to do this. Take this in the broader...

Brian L. Swartz

Greg's just in a bad mood.

Gregory W. Cappelli

Yes, take this in the broader context of we really -- the actions that you see happening today on the $300 million minimum improvements in efficiency is, it's really creating an organization that can be more nimble, adapt quicker to all your questions about the industry and what's happening and how you can be different and stand out. You have to be able to make changes effectively, quicker. You have to be listening all the time to the people you're asking to come to your organization, whether it's B2B or B2C. Those are the things that we've been doing, working so hard on the past year. And I'll tell you, our University of Phoenix team, the leadership team there has done an amazing job at looking at something they built over the past 34 years and looking at it and working with outside consultants at not only academics, technologists, courseware developers, but looking at it holistically and saying, "Look, the world's changed. We've built something amazing that served for a really, really long period of time and gave us a great competitive advantage for many -- for a number of decades. And now let's look at where we need to go and to take this." And they are the ones that designed the new campus footprint because they know what students are asking for today. And that's a better technological experience, that's fiber communities, that's being in the right geographic areas. It's everything that we talked about. So this has been going on for some time now. I don't know, Joe, if you want to follow up.

Joseph L. D'Amico

Yes, I think the thing that is hard to convey, but I'll try, is the fact that although obviously closing down and phasing out campuses is difficult, and although it's concerning to us to affect people's lives the way this does, but some people obviously need to look for another job as a result, I can tell you that the management team, from the ground up, first of all, it was their recommendation. And secondly, they believe this is absolutely the right thing to do for our students. And they're excited about actually making these changes. It's hard to believe, but this is -- it's amazing to me to see the behavior of our folks, how they have all rallied around this as being the right thing for our students.

Gregory W. Cappelli

This is exciting. This is allowing them to sort of -- to take a lot of weight that's been around their circumstances and move forward.

Does this -- these changes, do they bring along with it any kind of change in the organizational structure, i.e. is it going to be a flatter -- something with less distance between you guys in the room there and the people out in the field? Or is there any change in kind of, let's say, duration of visibility that you guys expect from making these changes, quicker understanding of what's going on locally or is it still the same kind of regional director structure you've had historically?

Joseph L. D'Amico

No, well, there's absolutely a change structurally there to eliminate layers and processes and to be a lot more effective, again, designed from the bottom up, which is the best way for these sorts of things to happen. So it's very positive.

Gregory W. Cappelli

It's a really good question. We should have included that in our comments. But it is flatter, and that's what can make you more nimble and able to move quicker. And, again, that was their design.

Okay. And then a final one for me. As the quarter went along and going back to the last earnings call, you guys had talked about kind of flattish inquiries and expected starts to be down. It sounds like as the quarter went, the inquiry levels dipped further either because you guys are pushing them down or just the market. And it sounds like the start trends were probably tougher at the end of the quarter than the start of the quarter. Out of those -- does that reconcile how you guys saw things play out during the quarter or is there something else I'm missing?

Gregory W. Cappelli

Brandon, again, we don't comment into quarter on the trends. But what I would tell you is I'm pretty certain that if our organization wanted to increase leads, they could do that right now. There are plenty of channels to do that in. We're looking at that holistically about what we're trying to drive towards, which is successful outcomes. We want to drive more people to the University of Phoenix websites so they could take assessments. We're driving more towards -- significantly more towards the Workforce Solutions which doesn't show up in any of that, right. So it's really in the mix of the way that we're trying to drive our lead flow, and therefore, impacting the University and the outcomes. I totally understand what you're saying. We just don't look at it that way in terms of here's one channel, the channel producing lead flow that was going up or down or sort of in between. And the other thing that we look at very carefully is the productivity of our enrollment advisers, which has gone up very significantly over the past year.

Operator

Your next question comes from the line of Andrew Steinerman from JPMorgan.

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

This is Jeff Volshteyn. I know it's late, so I'm going to be quick with some numbers questions. How many employees will -- do you have at the end of the fiscal year?

Brian L. Swartz

Yes, we will file our 10-K next week, Jeff. Let me just pull up that number, I don't know it off the top of my head here, but I can give it to you.

Gregory W. Cappelli

Do you have another question?

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

Yes, sure. How much do you think have on repurchase authorization, the way it stands now?

Gregory W. Cappelli

We do not have anything left on the reauthorization as it stands right this minute. That's obviously something that we can change at any point in time by having a conversation with the board.

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

Okay. And then stock compensation, how's the split across the expense line items?

Brian L. Swartz

It's pretty consistent with what we've seen previously, so that the trends in terms of the amount in G&A versus marketing or instructional is the same for the most part. Just to answer your first question, our year-end total headcount is about 17,700 people. That's full-time non-faculty. You'll see that in our 10-K next week.

Operator

Your next question comes from the line of Trace Urdan from Wells Fargo Securities.

Trace A. Urdan - Wells Fargo Securities, LLC, Research Division

I also recognize it's late, so I'll -- I just have one thing that I want to ask about. And that is that I'm struggling with this concept of sort of deliberately reducing the ad spend and the inquiry flow in an environment where your conversion rates are going up. And I understand that the goal is quality, but you also have this orientation program at the back end that's an attempt to deal with that as well. And I'm just wondering, do you have data that tells you that this decision to kind of get fewer leads is the right one to make? I mean it almost feels like you're sort of -- you feel like you know the answer upfront about how -- about which students are recruited and what's going to happen to them when they got all the way through the process. And I haven't heard you talk about that. So I'm just wondering if you really have that data.

Gregory W. Cappelli

We're building data. We're not trying to reduce lead flow, to reduce it. That would be the wrong impression. What we're doing is we're looking at all lead sources. We're looking at the business historically of generating leads. And we have a strategy for where we'd like to see the organization go, where we'd like to see students come in through. We'd like to see more students coming from community colleges to us. We'd like to see more students coming in through our Workforce Solutions area. That's where we're building people and the organization in that area. We want to see less students come in through sources that we don't have as much control over, that we don't understand as much about the person, we haven't assessed that person in the same way. It's not to say there aren't some really good channels or players in the affiliates. There are. We respect them. We use them and we'll continue to use them as long as they're in compliance. But I think some of them have had to get their own house in order in that area as well, and we're not going to do business with folks in that area. So it's been a combination of things. It really hasn't been, "Hey, we have all the answers." We know the outcome that we're trying to drive to and where we have our best experiences. And to some extent, we've been experimenting over the last year with those areas. Will it eventually become more clear? I think it will, and hopefully, we'll increase lead flow. Because as I said upfront, the goal is to help as many Americans that want to be helped and people throughout the world so that they can get the skills they need to do the jobs.

Operator

There are no further questions at this time.

Gregory W. Cappelli

Thanks, operator. I'm just going to close by thanking the tremendous efforts of all the employees at Apollo and University of Phoenix. I can't even begin to tell all of you on this call the dedication and hard work that they're putting into this, certainly, the reinvention that we talked about of our future of the organization. Our strategy is clear. We're all dedicated to getting Apollo Group back to growth by closing the skills gap in the country and abroad. So thanks for taking -- I know this a lot of time to take out of your schedules this afternoon, and we'll look forward to following up with you going forward. Take care, everyone.

Operator

This concludes today's conference call. You may now disconnect.

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